Delaware Refuses to Blue Pencil Overbroad Restrictive Covenants Following Business Acquisition

In a recent opinion, the Delaware Court of Chancery refused to enforce or blue-pencil restrictive covenants imposed after a national restoration company acquired a local restoration business.

Although it is an unpublished opinion, the case presents another example of the Delaware Court of Chancery refusing to blue pencil an overbroad restrictive covenant agreement.

In BluSky Restoration Contractors, LLC v. Robbins, C.A. No. 2025-0726-DH, the plaintiff, BluSky Restoration Contractors, purchased a restoration company founded by the defendants and required that they enter into agreements containing noncompete, non-solicitation, and confidentiality covenants. The noncompete was for a period of two years after employees’ separation, the restricted territory was anywhere that the employer or its subsidiaries do business, and the consideration was the employees’ $300,000 annual salaries, plus the ability to earn bonuses.  The non-solicitation clause also had a two-year duration and applied to the plaintiff, as well as its subsidiaries and its affiliates.

The defendants moved to dismiss the complaint on the basis that the restrictive covenants were unenforceable as overbroad in scope, duration, and geography.  The Court granted the motion to dismiss, holding that the geographical restriction exceeded the employer’s competitive space and legitimate business interests, and that the noncompete lacked sufficient consideration to justify the restrictions. In weighing the balance of the equities, the Court emphasized that because the employees were compensated as regional executives, the inclusion of the employer’s subsidiaries and affiliates exceeded the employer’s geographic footprint and legitimate business interests.

BluSky argued that the Court should blue-pencil the agreements. While the Court acknowledged that it has the authority to blue-pencil overbroad restrictive covenants to supply reasonable limitations, it refused to do so, stating that blue-penciling would detract from the goal of requiring parties to draft reasonable restrictions. Instead, the Court declared the restrictive covenants unenforceable in their entirety, sending a clear message: draft restrictions narrowly, or suffer their unenforceability.

Employer Takeaways

This decision signals that Delaware may be transitioning to a “red-pencil” state in which courts generally refuse to reform overbroad restrictive covenants.  Although the Court noted that Delaware courts may blue-pencil overbroad covenants, several Delaware courts in addition to the BluSky court have refused to do so.  Employers located in Delaware should ensure that their restrictive covenants are narrowly tailored and do not include overbroad language such as “attempts” to solicit customers.  In addition, employers should limit the scope of noncompetes and non-solicitation covenants to the specific employer’s competitive space – as opposed to expanding the scope to that of the employer’s subsidiaries and affiliates.

Employers with employees located in multiple jurisdictions should review our 50-State Noncompete Survey, and consider working with counsel to draft a restrictive covenant agreement that complies with the law(s) applicable to their workforce.